Advice
5 things to consider before applying for a bank loan
27/08/2019 17:33
For those who have a limited budget, a bank loan is the perfect financial solution to buy a home. To choose the right bank, here are 5 things you should consider.

1. Bank loan requirements

Even though each bank has different requirements for home loans, there are still common mandatory standards that you must meet so that banks can assess risk and affordability. Search for bank loan requirements on the Internet, read all lines twice, and prepare the necessary documents. By this way, you can shorten the waiting time and are more likely to get approval.

Some banks have “easier” requirements than others regarding lender income stability and collateral. Thus, the lender should consider carefully to avoid complicated and time-consuming procedures when applying for a loan.

applying for a bank loan
A bank loan is the perfect financial solution to buy a home

2. Interest rate

Lending interest rate is considered to be one of the most important criteria when assessing a bank's competitiveness and ability to attract customers.

Although it is the psychology of borrowers to prefer low lending interest rate, choosing a low-interest bank is not always the best decision. Some bank gets the “low interest” label by applying that stunning 8% interest for only 6 to 12 months and gradually increasing by 3 to 4% in the following months. On the other hand, loans with higher interest rate usually come with incentives like reducing interest rates based on the remaining balance.

To avoid the situation, it is better to actively collect information related to bank loans such as preferential interest rate and how it applied via the bank website or conversations with the bank staff.

3. Loan term

Loan term is the period over which a loan agreement is in force, and before or at the end of which the loan should either be fully repaid, both principal and interest, or renegotiated for another term.

applying for a bank loan
Customers should pay attention to the term and interest rate when making a bank loan

Loan term varies from 5 years to 20 years or above based on the particular offer of the bank. Generally, the short-term loan has a lower interest rate than the long-term loan. Hence, borrowers should balance the value of the desired house with the budget and calculate the monthly interests. If your income is below average, it is better to take a long-term loan with. For example, a VND600 million loan paid in 1 year has the monthly payment of VND50 million but will have VND10 million payment each month if the term is 5 years.

4. Loan limit

Most bank loans for property support up to 85% of the house value. Some banks even support 100% of house value but with strict requirements and high-interest rate. The most ideal option is to have 50% of the house value and fund the remaining 50% through a bank loan. With a stable monthly income, this 50% loan rate is considered moderate, not creating financial pressure to your family.

5. How long does it take to get approval?

Once you apply for a bank loan, unfortunately, your application won’t be review instantly but rather be done in several days to a week depending on the banking process. The advice for borrowers if to prior banks that give time commitment and arrange the time actively to get better support.

Review your application carefully before sending it to the bank as well as pay attention to details like affordability and loan value. The bank may turn down your application or lengthen the approval process if the monthly payment exceeds your affordability or the loan value is ridiculously high. 

(Source: Enternews.vn)